Retail inflation slowed to 5.91% in March over the previous month due to easing food prices, government data showed on Monday.
The retail inflation based on Consumer Price Index (CPI) was 6.58% in February 2020 and 2.86% in March 2019.
The Consumer Food Price Index (CFPI) for March 2020 was 8.76%, lower from 10.81% in the previous month, the data released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, showed.
In March 2020, rural inflation was at 6.09% while it was 5.66% in urban areas.
The government has mandated the Reserve Bank of India (RBI) to keep inflation at around 4%. The RBI mainly factors in retail inflation while deciding its monetary policy.
Experts react
Reacting to CPI numbers, Upasna Bhardwaj, Sr Economist, Kotak Mahindra Bank, said, “CPI figures came in line with our expectations. Going ahead we expect the trajectory to remain above 5% for the next few months before beginning to moderate at Sub-4% around August. We expect the MPC to look through the near term inflation readings and focus on the medium term trajectory while addressing the economic and financial stability. We expect the RBI to adopt several unconventional measures to tackle the current crisis beyond repo rate cuts. We see additional rate cuts of 50-75bps in the year ahead given our GDP expectations of 0.4% in FY21.”
Rajani Sinha, Chief Economist & Head Research at Knight Frank India, said, “The moderation in CPI inflation is mainly because of fall in food price inflation. With low crude oil prices and sharp slowdown in the economy, CPI inflation is expected to fall further. Weak demand side pressure on inflation would outweigh any supply side bottlenecks in the near-term, keeping overall inflation muted."
“As expected India’s Mar CPI dropped to 5.91% vs 6.6% in Feb. There has been a drop in food and vegetable prices which had led inflation figure to fall below the upper band of RBI’s target. Due to the lockdown, growth in both input costs and prices charged have weakened in March, suggesting retail inflation could slow further and give the RBI more scope to cut interest rates further or taken unconventional measures,” Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, said.